If,in the Cournot model of a duopoly,the firms colluded instead of behaving independently:
A)the outcome would be closer to the competitive equilibrium.
B)the outcome would be indeterminate.
C)firms could increase their combined profit.
D)the price will be below average cost.

Question

Quizplus · Accepted Answer

If the firms collude, they can decide on a joint output level and share the resulting profit. By jointly determining the output, they can increase their combined profit. However, this outcome is not socially optimal as it leads to higher prices and lower output than the competitive equilibrium.

If,in the Cournot Model of a Duopoly,the Firms Colluded Instead